Altcoins in Buy Zone as MVRV Divergence Signals Opportunity

The on-chain analytics firm Santiment has revealed that the majority of altcoins are currently in what has historically been a buy zone. This insight comes from Santiment's MVRV Opportunity & Danger Zone Divergence Model, which is based on the Market Value to Realized Value (MVRV) Ratio. This ratio is an on-chain indicator that shows whether investors in a cryptocurrency are holding their coins at a net profit or loss. When the MVRV Ratio is greater than 1, it indicates that the average investor is holding a profit. Conversely, a value under this threshold suggests that investors are predominantly holding at a loss.

Historically, holder profitability has had a significant impact on the prices of digital assets. When investors are in large profits, they may be tempted to sell their coins to realize their gains, which can impede bullish momentum and result in a price top. On the other hand, when holders are significantly underwater, it creates market conditions where profit-takers have run out, allowing the cryptocurrency to reach a bottom. Santiment’s model exploits these dynamics to define buy and sell zones for altcoins by calculating the divergence of the MVRV Ratio over various timeframes (30 days, 90 days, and 6 months).

According to the model, a value greater than zero suggests that average trader returns are negative for that timeframe, while a value below zero indicates positive returns. This is the opposite orientation of the MVRV Ratio, with the zero level taking the role of the 1 mark from the indicator. The graph shared by Santiment shows that almost all altcoins have their MVRV divergence greater than zero on different timeframes. Most of these altcoins have their mid-term MVRV divergence greater than 1, placing them in the opportunity zone and indicating a buy signal for the majority of altcoins.

The negative returns for these coins come as the market has been in turmoil following news related to tariffs. While the model indicates a buy signal for altcoins, the uncertainty surrounding tariffs may continue to impact the market. Santiment notes that if a global tariff solution is reached, it could trigger a rapid cryptocurrency recovery. However, this remains a significant uncertainty based on the latest media coverage, which refers to a potential "trade war" between the US and the majority of the world.